Common factors in Latin America's business cycles |
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Authors: | Marco AiolfiLuis A.V. Catã o,Allan Timmermann |
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Affiliation: | a Goldman Sachs Asset Management, United Statesb Research Department, Inter-American Development Bank, United Statesc International Monetary Fund, United Statesd Rady School, UCSD, United Statese CREATES, Denmark |
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Abstract: | We develop a common factor approach to reconstruct new business cycle indices for Argentina, Brazil, Chile, and Mexico (“LAC-4”) from a new dataset spanning 135 years. We establish the robustness of our indices through extensive testing and use them to explore business cycle properties in LAC-4 across outward- and inward-looking policy regimes. We find that output persistence in LAC-4 has been consistently high across regimes, whereas volatility has been markedly time-varying but without displaying a clear-cut relationship with openness. We also find a sizeable common regional factor driven by output and interest rates in advanced countries, including during inward-looking regimes. |
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Keywords: | E32 F41 N10 |
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